Monday, May 30, 2016

Debt default

This came in response to Trump toying with the idea of US debt default a few weeks ago. My intention was to post it here in a timely manner but it got lost it the sauce for awhile. So in the famous words of Ringo Starr, forgive the lateness of my reply.


Trump was probably just trying to reveal a little perceived financial acumen. When interest rates rise, bonds become cheap. Since the government has an effective perpetual lock on how low the floor is on the money supply and an explicit perpetual lock on how much of the real value of that money supply that accrues to itself, it can make good on those bonds for less than it sold them for. Instead of taking money from taxpayers, it's taking money from investors. It's all smoke and mirrors since the currency is fundamentally unsound, based on nothing but word of the federal government itself.

That said, there are three ways the US federal debt resolves:

1) A massive increase in the money supply and corresponding severe inflation, 2) default, or
3) some sort of advance comparable to the industrial revolution or maybe scalable nuclear fusion that supply-sides us out of the massive hole the US has dug itself into (tinkering with marginal tax rates is not going to do it--this requires a revolutionary technological advance).

It will never be paid off otherwise. The Keynesians and the monetarists have no more arrows left in their quivers. They're to the point now of talking about negative interest rates. We've had almost a decade of rates approaching zero while simultaneously seeing real per capita growth, well, approaching zero as well. There's no way out.

We're on top of another bubble. Student loans are my best bet for the primary way it expresses itself, with another housing bubble as the next most likely trigger. It may be a combination of the two or something else altogether but it's not a question of if, it's a question of when. Another deep down turn is coming, and the "recovery" we've seen over the last eight years has been so anemic that it feels disingenuous to even refer to it as such. We're going to be stuck in this bumpy, secular decline until something major gives.

Option #1, government-induced hyperinflation, is massive theft from the collective productive class in America. This is the most likely way it resolves. It's why we don't have a mortgage (if nothing else, we'll have the house and the land it's on), a large chunk of savings in gold (and varied other tangibles like the power nine), the rest in stocks (which are inflation-resistant if not inflation proof), and virtually nothing in cash or cash equivalents.

I prefer #2, the Rothbard option, default. It's the ultimate America-First answer. For all other non-governmental or government-backed investment options, creditors take a real risk in lending for a return. If the debtor can't pay, the creditor takes a haircut. The creditor has legal recourse depending on the situation, but best case scenario he gets less than his principal, often substantially less, as in pennies on the dollar. For those who foolishly assumed the debt of the US federal government was a safe place to plant their assets, they'll have a rude awakening.

The sovereign wealth funds and the big foreign government buyers of US debt can go to hell. The drug dealer, China, wanted to keep lending to the drug addict, the US, so the addict could keep buying opiates--the stuff that makes up our half-trillion dollar annual trade deficit with China--from the dealer, and now the addict is kicking the habit and refusing to pay because he can't pay. Too bad, dealer. You should've seen what a bad investment this was. There's no squeezing blood from a stone, and the addict can still kick your ass in a fight so you just lose, hard, on this deal, dealer.

It's a reset button, it'll cause a lot of immediate economic turmoil, but what rises out of the ashes will be a saner, more sober global financial system that ideally won't be based on absurd fractional reserve banking, massive debt leveraging, and perpetual debt servicing.

Saturday, May 28, 2016

Trump tease

Trump shouldn't have walked this back. A debate would be tactically brilliant.

Sanders needs the debate far more than he does, so he has enormous leverage. Vet the questions ahead of time, format it in the usual forum style where the actual direct interaction between the participants is minimized, emphasize things he and Sanders have common ground on, like trade and--before Hillary forced Sanders to shift leftward in primaries--gun rights and immigration skepticism, be disciplined enough not to launch a verbal kill shot at Sanders, and otherwise use it as an extemporaneous stump speech opportunity where he is at his best.

The downside risk is easily mitigated. With his charisma and frame control he's masterful at avoiding the body blow. This isn't even a debate he wants to decisively 'win'. The overarching objective is to prop Sanders up to make Hillary's nomination as unsatisfying to Sanders' supporters as possible.

Lock Hillary out of a debate with the largest audience in American history--her elective absence being something both he and Sanders could allude to in their opening remarks. Endear himself as much as possible to disaffected Sanders' supporters with an eye towards the general election. Accentuate Hillary's ire towards Sanders to diminish the salience and status of the position Sanders is offered in a Hillary administration as much as possible. Sanders as Hillary's VP is the worst case scenario and anything that makes that outcome less likely is worthwhile. Get Hillary to offer him something lame like housing secretary instead.

That said, net-net he still benefits from having created this speculation before reneging. The expectations for Hillary to debate Sanders again are obviously higher than for him to have done so. Everyone looks apprehensive about going one-on-one with Sanders, and an enhancement in Sanders' image hurts Hillary, with anything hurting Hillary helping him. Sanders ends up garnering more attention over the course of the week than Hillary does. He avoids the potential debate ambuscade.

Wednesday, May 25, 2016

Hillary's white flight

The following table shows the change in the number of white votes Hillary Clinton received in the 2016 Democrat primaries and caucuses compared to the 2008 Democrat primaries and caucuses for states where exit polling was conducting in both years (with the exception of Iowa, whose entrance polls in '08 didn't record respondent race):

West Virginia-75.9
North Carolina-29.5
New York-28.6
New Hampshire-7.1
South Carolina+22.1

Through these 26 states, Hillary has received 2.14 million fewer white votes in '16 than she did in '08. She's down in 23 states and up in just three.

Of those three, South Carolina and Illinois have easy explanations. In '08 North Carolina senator John Edwards won a plurality of the white vote. The primary occurred when there were still three electorally serious candidates in the race.

Obama had home field advantage in Illinois in '08. Even so, Hillary's white vote increase in '16 was still quite modest.

Virginia is the only state she convincingly improved her white support in from '08 to '16. Lots of federal government trough-feeding (defense) industries and contractors in the state who were afraid Sanders would cut their allotments?

In an attempt to put Sanders away, Hillary has said her top presidential priorities will be gun control and immigration 'reform'--amnesty, citizenship, etc. Trump, in contrast, has made immigration his signature issue and recently received the NRA's endorsement.

While Black Lives Matter becomes increasingly brazen and thuggish, Hillary is singing paeans for Trayvon Martin's reckless, derelict mother. Trump unapologetically points out that the group is trash.

From her failed run in '08 Hillary learned that winning white Democrats over doesn't matter. White Democrats won't convincingly support a candidate blacks don't. Blacks, in contrast, are monolithic and all vote for the same person. Ergo, white voters can go to hell, both in the primaries and in the general election.

This election is shaping up to be one of the most lopsided in history among whites. Given that Trump will need nearly two-thirds of the white vote to win, it can't be lopsided enough.

Sunday, May 22, 2016

Trump leads

If what many of us are working for comes to pass (and Nate Silver underestimates Trump yet again*), it'll be fun to retrace the journey, highlighting the milestones along the way.

Here is one such milestone. Trump is leading Hillary in RCP's general election polling average for the first time:

The lead is razor thin and well within the margin of error. But it's only May. Trump's numbers are all moving up. Meanwhile, Hillary has been bumping along horizontally and she has so many as-of-yet unexploited vulnerabilities that it's hard to see much of a way for her to ascend. Polls of "likely voters" are, other things equal, superior to those of "registered voters", and Trump's lead is largest in the only "likely voters" poll included in the average. Trump unofficially ended the Republican primaries substantially outperforming his polling numbers. Hillary can't keep pace (see Oregon, for example).

The Clintons are in trouble.

Parenthetically, picking Sanders as vice president would probably reset the general election match up to a month ago when Hillary averaged a 5-10 point lead. Besides the bad blood between Sanders and the Democrat party machine, this would of course mean a white-white Democrat ticket. I won't be alone in the schadenfreude I'll enjoy if we get to see that straining the precarious unity of the Coalition of the Fringes.

* Silver, who claims the biggest mistake he made in the Republican primary process was acting like a pundit and failing to create a quantitative model to support his predictions and here he is repeating the same allegedly flawed process for the general election. It wasn't the lack of a formalized model per se, though, that caused him to miss so spectacularly, it was his failure to look at the most relevant indicators that did.

Friday, May 20, 2016

Of hotties, hags, and harpies

Single, younger women vote Democrat and older, married women vote Republican, of course.

If we adjust for age and number of children birthed, though, I bet Trump's women are aesthetically better than Hillary's are.

When we're talking about activist-types, or at least the ones who'll get campaign gear and go to rallies, Trump's girls crush Hillary's, no contest.